I'm a Fellow at the Adam Smith Institute in London, a writer here and there on this and that and strangely, one of the global experts on the metal scandium, one of the rare earths. An odd thing to be but someone does have to be such and in this flavour of our universe I am. I have written for The Times, Daily Telegraph, Express, Independent, City AM, Wall Street Journal, Philadelphia Inquirer and online for the ASI, IEA, Social Affairs Unit, Spectator, The Guardian, The Register and Techcentralstation. I've also ghosted pieces for several UK politicians in many of the UK papers, including the Daily Sport.

Apparently Apple's iPhone 5c Is A Failure Already

This is what the Daily Mail tells us at least, that the sales of the iPhone 5c have been “disappointing” and that production has been slashed as a result. They even ask if the 5c should be regarded as a “failure”. I can’t say I agree with them really for a couple of reasons I’ll give you in a moment:

Is the iPhone5C a failure? AppleApple ‘halves’ production and slashes the price of its handset in China due to ‘dismal sales’

Apple said to reducing production from 300,000 a day down to 150,000

Inside source admitted the drop in production to a Chinese technology site

That’s all a little over the top of course but then the Mail is closer to a tabloid than anything else so that’s to be expected.

The two little points that make me think that Apple’s not got a “failure” on its hands with the iPhone 5c are as follows. The first is that of course production has gone down since the launch. This is how it works of course:

Apple may have smashed its own sales records in September by selling nine million handsets in just three days, but figures do not appear to have remained anywhere near that high since.

An inside source has told Chinese website C Technology sales of the cheaper iPhone 5C have been ‘dismal’ and Apple has halved production of the plastic model as a result.

Well, yes. For this is what Apple does for Apple is a sensible company. In the weeks running up to the launch of a new model they have those Chinese factories running on as much overtime as can be squeezed out of the workforce. For they know very well that there is always pent up demand for their new models. They can see that in the fact that sales always start to drop off in the lead up to the announcement and release of such a new model. So, obviously, those first manufacturing runs are going to be larger than they will be just a few weeks later.

So that’s the first thought: that of course daily manufacturing numbers have been cut because that’s just what happens after the build and ramp up to a product launch.

The second thought is to look at the actual numbers they are talking about:

The suppliers claim they have gone from making 300,000 handsets a day, on average, to just 150,000

Think back to the Google&#039;sGoogle&#039;s Moto X launch, where they were all so proud of manufacturing (really, assembling) those phones in the US. They were boasting about 100,000 phones being made per week. Note, per week, and Apple is making, of just the iPhone 5c, 150,000 a day. Or, on a weekly basis, ten times as many. That’s really some failure right there.

We can go further than this too. OK, so this is last years’ figures but what the heck.

Huawei had a good fourth quarter, which helped it reach the No. 3 position among smartphone vendors for the first time. In 2012, Huawei sold 27.2 million smartphones to end users, up 73.8 percent from 2011.

That’s very nice for Huawei of course, but have a look at Table 2 in that link. Note that that is of mobile phones, not just smart phones.

Now think about Apple’s daily production of the iPhone 5c again. 150,000: that’s as near as 55 million handsets a year. That would make this one handset, the iPhone 5c, on its own, the sixth largest handset manufacturer in the world. And please do note again that this is of all mobile handsets, not just smartphones.

Some failure that, eh?

So no, I’m afraid that I don’t agree with the Daily Mail here, I don’t think we can regard Apple’s iPhone 5c as being a failure just yet. Not that it’s all that surprising that I disagree with the Daily Mail you understand. We might just about agree that kittens are cute but anything more complex than that we’ll probably differ on.

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Enter Your CommentThe iPhone 5C is an iPhone 5 with a different cellular radio and and antennas (to support more LTE bands) and a better front camera, all in a plastic case that is easier and cheaper to manufacture than the metal case of the iPhone 5.

The iPhone 5S is an all new phone that is a new design from the ground up, with all new electronics (custom made for Apple rather than off the shelf), in that trickier and more expensive case – just about the only thing that is the same as the iPhone 5.

Thus the iPhone 5C was relatively easy to produce, and the iPhone 5S was hard to produce. Therefore Apple had lots and lots of 5Cs stockpiled for the launch (with no real constraints on supply), and as many 5Ss as it could make stockpiled (but many constraints on supply, as ramping up new production lines for all new products is hard).

However, the problem is that the sorts of people who buy iPhones in the first weeks after a new model is announced are the sorts of people who pay attention to technical specs, and who want the latest and greatest. That is, they want the 5S and not the 5C. A few of these will buy a 5C if the 5S is not available, but mostly they will wait, or in some cases go and buy something from Samsung. There is a problem, though, which is that demand is greatest for the model for which supply is smallest, and vice versa.

Still, though at launch to make as many 5Ss as they can, and enough 5Cs that they will not run out of them, regardless of what level of demand they get. So they have a deliberate and intended stockpile of inventory. They do this, discover what demand for the 5C actually is, and then cut production to reflect accurate demand and also to reduce the stockpile.

The other thing to bear in mind is that demand for the 5S is high now due to the early adopters preferring it, these are not actually the majority of the mobile market. Most people wait until their contract is up, go into a store, and then shop for a new mobile. These people are less concerned with high end specs and having the latest model, and are more price conscious. They are the actual target market of the 5C, and the expectation is that the 5C will be more of a hit with them than with the early adopters.

There is a third category of buyers, which is those who don’t go into a store looking for a new mobile until the old one actually breaks, or because their children insist that their old mobile is embarrassingly unfashionable, or something like that. (Or because they have finally just decided that they should get their first smartphone). They might be paying £15 a month, and probably want to keep paying £15 a month and not pay anything up front. I am told that the iPhone 4 (which Apple has just discontinued and which is now three years old) sold tremendously well to this sort of customer in the UK for much of 2013, precisely because it had been discounted to that “Free on £15 a month” level by Carphone Warehouse and Phones 4U. Such a customer explains the £15 a month thing, says he or she would like a smartphone, and asks “Can I have an iPhone?”. The salesman says “Absolutely”, and pulls out the iPhone 4. Everyone is happy, and the customer will likely be served well by that iPhone 4.

Apple has been doing well selling its old models to mid market customers, without getting much publicity for doing so. (They have been emphasising it repeatedly in their earnings calls, though). The 5C is their first model that is aimed directly at the mid market customers from its launch. It’s aimed at the second category above first and then probably the third category in a year’s time. Whether it is a hit with people in these categories is not something you learn straight away.

Very nice article for its clarity and detail analysis. Regardless of which corporation, writers should perform at least this level of detail analysis before commenting.

It is obvious that Apple needed to deal with annual problem of shortage at launch. It is obvious that Apple would do its best to ensure units will get into the hands of buyers. Unfortunately, few “professionals” even bother with such analysis. They are still stuck in the Microsoft Empire era when software was an assumed constant and hardware pricing was the only differentiating factor. So all these professionals have are “cheap” and “market share”.

If we listen to the professionals, and even a couple of writers here at Forbes, then we would have heard the following:

1. If Apple did not announce a number, then the sales must be bad. 2. If Apple did not announce lengthening delivery time, then the sales must be bad. 3. If there is a shortage, then it is bad too. 4. If there is no cheap unit, then market share will drop and that is bad. 5. If there is a cheap unit, then margin will suffer and that is bad.

What is conspicuously missing is any in-depth analysis to understand the entire big picture.

Tim, I get the impression this is getting too easy for you. Rather than the vast pickings and choosings of Daily Mail pieces that anyone would disagree with, why not try finding that rare piece where they have perfected factual and logical reporting of the incident. Just for a change of pace.

You should also remember that they didn’t have the fab online for the iPhone5S processor, and were manufacturing them out of a third party fab (it’s pretty easy to figure out which one by looking at the die size). The iPhone5C was basically thrown out there to offer people who wanted a 5S something to buy when the 5S wasn’t available in quantity.

Spot on Tim! Any supply chain guy (personal experience) knows how important a good rollout can be. With apple, it’s partly about massaging the balance between availability, and enhanced demand due to some shortage.. Where is the “sweet spot?” With the kind of numbers TC produced on roll-out, he’s not going to produce excess inventory, nor leave too many customers without product. The media talks, and TC continues to shrewdly work his plan…. He’s a “Supply-chain Rock star,” and you can quote me on that.

every time I see an article on Forbes it’s the most pro-apple piece of crap that ever crawled out of Steve Job’s butt. You guys sound like the republicans still doing the math that makes them feel better. Twist the numbers however you want, but the fact is that no one wants last-year’s icrap in plastic for more money! And where’s the legendary flop 5S? I have yet to see it in a commercial – is that because Apple is still working the security bugs out of it’s “innovative” figure print scanner (it was innovative btw when Moto put it on the Atrix – and that wasn’t even the first scanner)

Do us all a favor Forbes, go back to journalism school and relearn objectivity. If you want to convince yourself that your favor toy is still valid in a world of much bigger, faster and innovative devices, start by smoking weed and leave the rest of us out of your delusion.

Everyone needs to calm down and understand that the average consumer is going to love this phone. I have an iPhone 5, and I’m not an Apple fan particularly, but it’s a fantastic bit of kit. And still is a year on. It’s speedy, it’s reliable, and I can rest assured that no matter what I want to do with it, I should be able to find a slick, well made app to perform the function. Android is a fantastic platform, and sure it has as many if not more apps than iOS these days. But are the majority of them of the same caliber as the majority of iOS apps? Not a chance. This phone answers a lot of request consumers have wanted for a long time such as a choice of colors and a lower price point. It may have last years innards, but at this point of mobile development, it makes such a small difference. That A6 processor has plenty of grunt to perform anything you’d want it to, and the camera still beats out a lot of supposedly better ones from competitors.

Most of the customers purchasing iPhones during the launch month are existing customers upgrading. They’re getting great trade-in offers from Apple or can sell their old phone to Amazon, Gazelle, etc. Apple gave me $206 trade-in for my two year old 32gb 4S iPhone and charged me $295 for a new 5S. It was a no brainer to go with the 5S.

Expect the sales mix to change after the surge of pent up demand from buyers who’ve been awaiting the new model after their old iPhone came off contract. New buyers are more likely to consider the 5C.

What a terribly written article! I clicked on the headline to read why the iPhone is a failure but found myself taking apart the flawed style of writing. Forbes needs to hire new talent to replace certain contributors.

Most kind of you. Two things: might I suggest that you write to the editors here so that you can suggest yourself as that righteous and just replacement? You clearly have an improved writing style to suggest to them.

Secondly, would you like to open your work to public scrutiny so that we can make similarly useful suggestions for improvement?

I don’t disagree with Ruby. I was thinking how misleading the article’s title was when I came across Ruby’s comment…then read Tim Worstall’s response. Tim, two things: 1.) You are the one employed as a writer…we know that’s not the first time you’ve had to hear criticism and 2.) You sound like an angry baby. Stop trolling your articles for comments about you and try and take it like a man next time.

There may be a lull in 5C demand, but wait until the holiday buying season begins in earnest. This less expensive, colorful, iOS refreshed phone will likely be on many kids’ holiday wish lists. It sits in the price range of affordable for a special gift from parents this holiday season.

Failure? I think not. I think it will contribute to FYQ1 results very nicely.

People forget that they have in past years offered the prior year model ‘un-modified’ for $99. This year they slightly improved the prior year model and kept the $99 entry price tag.

Disclosure: I own APPL shares and use their products but I’m not a blind fanboy.

No. Just no. The point here is that Apple was expecting a smash hit, à la iPhone in 2007, and had to cut down its orders to the minimum. To the point of the Moto X and other mid-range phones.

Which do SELL. Now, pray tell, where are the hordes of people sporting the 5C? In my travels through Italy, I haven’t seen a single handset. Sadly, it seems to me this is just another article attempting to save Apple the “disgrace” of failure, something not unheard of by the press. Heck, even the largest Italian newspaper tries its hardest to favourably advertise Apple, due to its heavy investments in the company and its ecosystem, I assume Forbes is the same. Or, perhaps Tim has just been promised a new 5S for this article /sarcasm